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- Topic: realized yield question
| Author | Topic: realized yield question |
|---|---|
| Hollywood @2014-05-21 00:23:00 |
bond pays 8% coupon, matures in 15 years and has a price of 825. if you expect to sell in 5 years at 940 what is your
realized yield. 17.1% 8.00% 11.89% 11.17% answer is C. i'd appreciate any help on this one. -thanks |
| vtom2009 @2014-05-23 09:20:23 |
applebee, who told you payments are semiannually? |
| applebee @2014-05-27 12:37:00 |
I thought it would be 11.17%.
What do you think? Anyone can help???? |
| applebee @2014-06-02 16:00:00 |
Ok, let us try again. Seems to me it all depends on the timing.
Assumes you wait until the end of year 5 and received all the coupon payment and then sell the bond for 940. The cash flow is : year 0 1 2 3 4 5 -825 80 80 80 80 1020 calculate the yield of this cash flow, it will be 11.89% If you sell the bond before the end of year, say, before you got the last coupon payment of 40. Then the cash flow is -825, 80,80,80,80,40+940 In this case, the yield is 11.17% Just my 2 cents, let me know if you see it differently. |
| vtom2009 @2014-06-22 11:04:11 |
That's elementary: any calculator TVM function: PV=-825 N=5 PMT=80 FV=940 => I/Y=11.8957 Pls send me 2 cents, -:) |
